Economist: Minimum Wage Hike Only Worth $9.25

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Saturday, April 19, 2014
WBAL Radio and Associated Press

In a plan approved by the legislature, full-time minimum-wage workers in Maryland will ultimately make about $875 less annually than they would have under the governor's proposed timetable, an economic analyst said.

Legislators voted last week to have Maryland's minimum wage reach $10.10 an hour by July 2018, whereas Gov. Martin O'Malley originally wanted it to reach that amount by July 2016.

David Cooper, an analyst for the pro-minimum wage group Economic Policy Institute, said that by mid-2018, $10.10 will be worth about $9.25 in today's dollars. Cooper based his numbers on the Congressional Budget Office's inflation estimates.

He said $10.10 will likely be worth about $9.67 in mid-2016.

"Just because inflation is always eating away at the purchasing power of the dollar, the longer you push out these increases, the less in spending power that means for these low-wage workers," Cooper said.

Senate Minority Leader David Brinkley, R-Frederick, a member of the Senate Finance Committee, said he and his colleagues chose this timetable to alleviate the burden on employers.

"Some of us would have extended it for 20 years," he said.

He said the wage hike will give incentive to businesses to rely more on machines, reducing the number of entry-level jobs.

For that reason, House Minority Leader Nic Kipke, R-Anne Arundel, said the delayed timetable could also mean a trade-off for low-wage workers. If a higher minimum wage means fewer jobs, then raising the amount more gradually could slow that attrition process.

But regardless, he said the wage increase will still put Maryland at a competitive disadvantage with its neighbors for attracting investors.

"Maryland is basically all borders," he said. "This is a bigger problem for Maryland than for many states."

O'Malley's plan also would have indexed the minimum wage to inflation after it reached $10.10. The House stripped away this provision and changed the timetable so the rate would reach $10.10 in 2017. The Senate Finance Committee voted to extend the timetable further, and both chambers ratified this plan.

Lawmakers also amended the bill to let businesses pay workers under 20 years old a "training wage," set at 85 percent of the general minimum, for their first six months on a job.

And they kept the base wage for tipped workers at $3.63 an hour, rather than raising it in proportion to the increase other workers will receive.

Mat Hanson, spokesman for the advocacy group Raise Maryland, said he still sees the bill's passage as a victory. Last year, without O'Malley's involvement, a similar measure died in legislative committees.

But the exemptions disappointed him.

"We should not have had to fight this hard or make this kind of compromises in an overwhelmingly Democratic state," he said.